The other night Mrs. G and I went out for burgers to Quinn's, a trendy gastropub here in Seattle. The place was packed, the food was creative yet comforting, as gastropub food is supposed to be. (While I’m on it, can’t anyone come up with a better term? Gastropub sounds like some intestinal malfunction in public. But I digress.)

Apart from the food, what impressed was the beer list. There were dozens upon dozens of choices, from around the world, all inviting and priced around $6 to $10. One good beer fills my wagon these days, and it’s a lot easier to find a great $6 beer than a great $6 glass of wine. I was reminded of this as I perused some interesting statistics just in from the Wine Institute in California.

Most of the press release profiled California wine shipments to the U.S. market in 2009. No surprises there. Shipments flat; dollar sales down. But at the bottom of the press release was a chart showing all wine sales in the U.S. – from California, other states, and foreign producers – spanning 1991 through 2009. Here’s where it gets really interesting.

Total domestic wine sales during that period rose from a low point of 449 million gallons in 1993 to a high of 767 million gallons in 2009. That’s a nice jump of almost 60 percent. But look at this: the total retail value of those sales went from $11 billion (again in 1993) to a high of $30.4 billion (in 2007)! It dropped slightly in 2009 to $28.7 billion. But low to high, in a 14 year period, that’s an increase of 275 percent!

You see where I’m going with this. In a subcategory – Sparkling Wine/Champagne – sales from 1991 to 2009 were absolutely flat. They showed no increase whatsoever. It seems clear that wine prices have risen so dramatically that people are switching from drinking Champagne on a beer budget to drinking beer on what used to be a Champagne budget.

There is only one conclusion from all this. Wine costs too much. It has risen too far too fast. You can point to all sorts of reasons – land prices, lower yields, rising labor costs, fancier equipment, etc. – and they may all be true. But whether true or not, it’s clearly unsustainable. If the wine industry is to remain healthy and continue to show the growth in consumption, prices are going to have to come down, and stay down. Otherwise, we’ll all be drinking a lot more beer.

8 comments:

MagnumGourmet
said...

I think the next shift in consumption is not so much related to the cost of wine, but to a shift in cultural attitudes. Wine is still viewed as a luxury (special occasion) item by most of the country. Two major changes must take place to really increase consumption in the states. First, people need to move away from the idea that wine is a Friday/Saturday drink with dinner. Second, is that it needs to become acceptable to have that 3oz glass of wine with lunch (whether your at the office or not). Both of these rely on a shift towards moderation in our consumption. By drinking less, but more often we can move the overall consumption higher.

PG – First, we can’t disagree that the increase in wine prices have far out paced the increases in wine volume, but on the surface I don’t know why that would be considered unusual. Everything you read and hear would indicate that wine quality has been improving so why shouldn’t prices increase to reflect that? And you also have to figure out what price point segment(s) have contributed most to the price increases. The study shows that wines at $7 or less make up 72% of all retailed wine, and I’d bet (although I don’t have the numbers) that if you threw in all wines up to $14, you’d cover 90-95% of all wines sold. So you see where I’m going with this? Are the price increases due to a $3 wine increasing to $8.25 over 18 years, as a simple example. 2 Buck Chuck has gone up in price, and how much was entry level CSM back in ’91?

Another thing besides simple price increases is increased volume of higher price point wines, e.g., the study shows the $10-14 segment grew 3.5 times more than the under $7 segment in ‘09. This faster growth in the $10-14 segment could certainly contribute to wine prices increasing faster than wine volume. There are likely other reasons that can be found in the numbers if you had all of them, but I don’t think it definitely means wine has become too expensive in a high-demand inflationary sense.

One other interesting point, at least for 1998-2009 the CA wine value went up by 50%, but non-CA wine value more than doubled.

Scott, I only have the limited numbers provided by the Wine Institute. If you can provide a more thorough accounting, I'd love to see it. Please email to me at paulgwine@me.com. If you read recent posts on this blog, you'll see that I agree completely that there are plenty of excellent and moderately-priced wines in the marketplace. But the overall trend shows a steep increase, and even if that only represents the high end wines, they are way out of line with reality, and wineries are suffering because of it.

PG – I’m looking at the same article/numbers you are looking at. And in fact quite the opposite, I pose it is very possible that the increase in total wine value over the last nearly two decades is due to both price increases and the “trading up” phenomenon in the under $7, $7-$10, and $10-$14 wine segments. And not the high end wines.

I've been out to dinner 3 nights in a row once in Prosser,twice in Richland---one glass of wine $10-$14 or 2 beers $10--do the math i'm not a cheap guy but if your wine list is predictable i'm drinking beer--does anyone out there like the idea of a good glass of wine, 6 oz pour, for $6.75 with a good meal? I don't think eveything needs to be over the top every time you go out------Tiny

You may be feeling the pinch, many are not... Maybe mass produced wine is too much, but wines crafted in small batches made by hand are not... This is from Seth Godin a few days ago

"The new trend in spending money is to buy things that are painstakingly hand built instead of efficiently mass produced. It might not be a better price than what you could buy at Target, but the very fact that you can pay for an artisan to create it, an artist to design it, a talented worker to bring it to life--that act makes a powerful statement about what you can afford and what's important to you. Instead of a bigger house, it's a house that's built from scratch by craftsmen. Instead of a bigger steak, it's a handmade dish of local poached vegetables..."